The Candleread Glossary

A bullish continuation pattern with a flat top and rising bottom — buyers keep stepping in higher while sellers defend the same level.

An indicator that measures average price volatility over a set period — used to size stops and position sizes.

A momentum indicator that measures the STRENGTH of a trend (not its direction) — readings above 25 mean a real trend is in play.

A position-sizing system where you INCREASE size after wins and DECREASE size after losses — the opposite of martingale.

The tendency to rely too heavily on the first piece of information you see (the anchor) when making decisions.

Australia's top-tier financial regulator — oversees forex and CFD brokers with strict rules on leverage, disclosures, and client protection.

A broker model where client trades are routed directly to external liquidity providers — the broker just passes through orders for commission.

The bid is what the market will pay you to sell; the ask is what the market will charge you to buy.

A trader or outlook that expects prices to rise. "Bullish" means optimistic about upside.

A trader or outlook that expects prices to fall. "Bearish" means pessimistic about upside.

The total cash in your trading account, not counting any open-trade P&L.

When price moves decisively through a significant support or resistance level, often triggering a new trend.

The company that gives you access to the forex market — the middleman between you and the currency you want to trade.

The first currency in a forex pair — the one you're buying or selling, priced in units of the second currency.

A short-term continuation pattern where price pulls back in a tight downward channel after a strong rally — usually breaks higher.

A short-term continuation pattern where price rallies in a tight upward channel after a strong drop — usually breaks lower.

When price breaks above a prior swing high (bullish BoS) or below a prior swing low (bearish BoS) — the moment a trend confirms or reverses.

A volatility indicator with three lines — a moving average and two bands set at standard deviations above and below it.

A pending order to buy ABOVE the current price — used to enter long when a breakout above resistance occurs.

A pending order to buy BELOW the current price — used to enter long on a pullback to a support or value level.

The price at which closing your trade results in zero profit and zero loss — moving your stop here protects you from a loss.

The central bank for the United Kingdom — sets interest rates and monetary policy that drive GBP currency pairs.

The central bank for Japan — historically the most dovish major central bank, with rates near zero for decades.

A qualitative report on US economic conditions published by the Fed eight times a year, two weeks before each FOMC meeting.

The government or industry body that oversees a broker and enforces rules on capital requirements, disclosures, and client protection.

A broker model where client trades are kept in-house (not routed to the market) — the broker takes the other side and profits from losses.

Two currencies quoted together — you're always buying one and selling the other at the same time.

A single price bar that shows open, high, low, and close for a given time period — the foundation of technical analysis.

The main inflation number — how fast prices are rising for everyday goods. Major driver of central bank decisions and forex moves.

A pair that doesn't include the US dollar — used to trade one non-USD currency directly against another.

A bullish continuation pattern shaped like a teacup — a rounded bottom followed by a small pullback before a breakout.

A specific type of break of structure that signals the END of a trend, not just a pullback — the first sign of a reversal.

A momentum oscillator that measures how far price has deviated from its average — used to identify overbought and oversold extremes.

The annualized rate of return that an investment would have earned if it grew at a steady rate every year — used to compare strategies over time.

A measure of how two markets move in relation to each other — values range from -1 (perfect opposite) to +1 (perfect same).

A trade where you borrow a low-interest currency to buy a high-interest currency, profiting from the rate differential.

The tendency to seek out information that confirms what you already believe and ignore information that contradicts it.

The US government regulator for futures, options, and forex — enforces strict rules on retail forex brokers operating in the US.

Cyprus's financial regulator — a common EU regulator for forex brokers that offers MiFID II passporting across Europe.

A derivative contract where you profit or lose based on the price movement of an underlying asset — without owning the asset itself.

A service that lets you automatically copy the trades of another trader — popularized by platforms like eToro.

The peak-to-trough drop in your account equity — a measure of how bad your worst losing streak got.

A candlestick where the open and close are almost equal — indecision between buyers and sellers.

A two-peak reversal pattern that looks like the letter M — signals an uptrend has failed at resistance.

A two-trough reversal pattern that looks like the letter W — signals a downtrend has failed at support.

A bearish continuation pattern with a flat bottom and falling top — sellers keep stepping in lower while buyers defend the same level.

A channel formed by the highest high and lowest low over a set period — used in classic breakout systems.

When a short-term moving average (typically 50-day) crosses BELOW a long-term moving average (typically 200-day) — a major bearish signal.

When price moves in one direction but a momentum indicator moves in the opposite direction — a warning of trend exhaustion.

Spreading risk across multiple uncorrelated trades, assets, or strategies — to avoid having all your eggs in one basket.

An index that measures the US dollar against a basket of six major currencies — the headline gauge of dollar strength.

The tendency to sell winners too early and hold losers too long — the opposite of what profitable trading requires.

The ability to follow your trading plan exactly — without deviation — regardless of how you feel in the moment.

Balance plus or minus your current floating P&L — what you'd have if you closed every trade right now.

A candle whose body fully swallows the previous candle's body — a strong reversal signal.

A forex pair that includes one major currency and one currency from a smaller or emerging-market economy — like USD/TRY or USD/ZAR.

A three-candle bearish reversal pattern that signals the top of an uptrend — small body in the middle, big bearish candle to confirm.

The average dollar (or R) amount you can expect to make per trade over many trades — the math behind whether a strategy works.

The central bank for the eurozone — sets interest rates and monetary policy for all 20 EU countries that use the euro.

The tendency to value something more highly just because you own it — drives traders to hold losing positions too long.

A broker that routes orders directly to a network of liquidity providers without taking the other side — no conflict of interest.

The US Federal Reserve's rate-setting committee — the most important meeting in global forex, held 8 times a year.

Fear Of Missing Out — the urge to chase a move that's already running, usually resulting in buying the top or shorting the bottom.

A bullish reversal pattern where price drifts lower in a narrowing downward channel — usually breaks up.

Horizontal levels drawn at key Fibonacci ratios (38.2%, 50%, 61.8%) of a prior move — used to find pullback targets.

Fibonacci levels projected BEYOND the original swing (127.2%, 161.8%, 261.8%) — used to set price targets after breakouts.

An order that must fill IMMEDIATELY in full or be cancelled entirely — no partial fills allowed.

A position-sizing system where you risk a fixed percentage of your current account equity on every trade — the standard for retail traders.

The portion of your account equity that's NOT being used as margin for open trades — what's available to open new positions.

The UK's top-tier financial regulator — one of the strictest and most respected in the world for forex and CFD brokers.

When a short-term moving average (typically 50-day) crosses above a long-term moving average (typically 200-day) — a major bullish signal.

An order that stays active until you manually cancel it or it fills — used for set-and-forget pending orders.

The total dollar value of all goods and services produced by a country in a given period — the broadest measure of economic health.

The mistaken belief that past random events affect future random events — "I'm due for a win after 5 losses."

A candlestick with a small body near the top and a long lower wick — a bullish reversal signal after a downtrend.

Hawkish = central bank wants to raise rates to fight inflation. Dovish = wants to cut rates to support growth. The two words you'll hear most in macro trading.

A three-peak reversal pattern with a higher middle peak — signals that an uptrend is exhausted and price is about to fall.

A swing high that's higher than the previous swing high — one of the two confirmations of an uptrend.

A swing low that's higher than the previous swing low — one of the two confirmations of an uptrend.

A modified candlestick chart that smooths price action — uses an averaged open and close to filter noise and reveal trends.

Opening an offsetting position to reduce risk on an existing trade — sacrificing some upside to limit downside.

The tendency to believe, after an event, that you "knew it all along" — distorts learning from past trades.

A bullish reversal pattern with three troughs — a deeper middle trough flanked by two higher lows — signaling a downtrend is ending.

A candle whose entire range (high to low) is contained within the previous candle's range — a sign of consolidation and pending breakout.

A multi-line trend indicator from Japan that visualizes support, resistance, momentum, and trend direction in a single chart overlay.

An order that fills as much as possible immediately, then cancels the unfilled portion — no resting orders.

A large order that's broken into smaller visible chunks — most of the size is hidden from the order book.

The US version of PMI — manufacturing and services indices published by the Institute for Supply Management.

The cost of borrowing money set by a central bank — the single most important driver of currency strength in modern forex markets.

The annual late-August gathering of central bankers in Wyoming where major policy speeches often signal market-moving shifts.

The weekly count of new applications for unemployment benefits — a real-time read on the US labor market.

A volatility-based envelope around a moving average using ATR — similar to Bollinger Bands but smoother.

A mathematical formula that calculates the optimal bet size based on win rate and reward-to-risk — used to maximize long-term growth.

The standard unit of trade size in forex — a standard lot is 100,000 units of the base currency.

Borrowed money from your broker that lets you control a large position with a small deposit.

Buying something expecting its price to go up — the most basic bullish position in any market.

An order to buy or sell at a specific price or better — guarantees price, not execution.

How easily you can buy or sell an asset without moving its price — high liquidity means tight spreads and instant fills.

A swing high that's lower than the previous swing high — one of the two confirmations of a downtrend.

A swing low that's lower than the previous swing low — one of the two confirmations of a downtrend.

When price briefly spikes through a key level to trigger stops, then immediately reverses — engineered by big players to fill orders.

The psychological tendency to feel losses about twice as intensely as equivalent gains — drives bad exits and held losers.

A bank or institution that provides buy and sell quotes to brokers — the wholesale source of forex prices and fills.

The amount of your own money locked up as collateral to open and hold a leveraged position.

The broker's warning (or automatic closeout) when your account loses too much and can no longer support your open trades.

An order to buy or sell immediately at the current market price — instant execution, no waiting.

A smoothed line showing the average price over a recent period — the most-used indicator in technical analysis.

Any forex pair that includes the US dollar and one other top-tier global currency — the most liquid pairs in the world.

A forex pair made up of two major currencies that does NOT include the US dollar — like EUR/GBP or AUD/JPY.

A three-candle bullish reversal pattern that signals the bottom of a downtrend — small body in the middle, big bullish candle to confirm.

The framework of swing highs and lows that defines whether a market is trending up, trending down, or consolidating.

A momentum indicator that compares two moving averages to show trend direction, strength, and potential reversals.

A volume-weighted RSI that measures buying and selling pressure — values above 80 are overbought, below 20 are oversold.

The largest peak-to-trough decline in account equity over a measured period — the worst losing streak you've ever had.

A betting system where you double your size after every loss — mathematically destined to blow up the account eventually.

The ratio of your equity to your used margin, expressed as a percentage — the broker's measure of how close you are to a margin call.

A broker that takes the other side of your trades — they profit when you lose, creating an inherent conflict of interest.

The US monthly jobs report — one of the most market-moving economic releases in forex, always the first Friday of the month at 8:30am ET.

The self-regulatory body for US futures and forex brokers — works alongside the CFTC to oversee the industry.

A candle whose range fully engulfs the previous candle's range — a strong sign of momentum and potential reversal.

A volume indicator that adds volume on up days and subtracts it on down days — used to confirm trends and spot divergences.

Two orders linked together — when one fills, the other is automatically cancelled.

Taking too many trades — usually driven by boredom, FOMO, or revenge — and bleeding capital through commission, spread, and forced setups.

The smallest standard price move in a currency pair — the building block of every forex profit or loss.

One-tenth of a pip — the fifth decimal place on most forex quotes, shown by brokers that quote fractional pips.

A candlestick with a long wick in one direction and a small body at the opposite end — a rejection of that price level.

The math that tells you how many lots to trade based on your account, stop distance, and risk tolerance.

The total profit or loss on your trades — the scorecard for your trading performance.

A short-term continuation pattern where price consolidates in a small symmetrical triangle after a strong move — like a flag but pointier.

A pair of parallel trendlines that contain price action — buy near the bottom, sell near the top, ride the middle.

A trend-following indicator that plots dots above or below price — used to set trailing stops and identify trend direction.

Calculated support and resistance levels based on the previous session's high, low, and close — widely used by intraday traders.

An inflation measure that tracks the average change in selling prices received by domestic producers — a leading indicator for CPI.

The Federal Reserve's preferred inflation gauge — measures the prices that consumers actually pay for goods and services.

A monthly survey of business managers measuring expansion or contraction in manufacturing and services — readings above 50 mean growth.

The willingness to wait for high-quality setups instead of forcing trades — the rarest skill in retail trading.

The mindset of judging trades by whether you followed your plan, not by whether the trade was profitable.

A managed account structure where multiple investors pool capital and a single trader manages it — profits are distributed proportionally.

The second currency in a forex pair — the one used to price one unit of the base currency.

A central bank policy of buying massive amounts of bonds to inject money into the economy and lower long-term interest rates.

A central bank policy of shrinking its balance sheet by letting bonds mature without reinvesting — the opposite of QE.

A price level where sellers have historically stepped in to stop the rally and turn price back down.

The ratio between how much you risk on a trade and how much you stand to make — the math that makes trading profitable.

Taking impulsive trades immediately after a loss to try to "get back" — the #1 account killer in retail trading.

A momentum indicator from 0-100 that flags overbought (>70) and oversold (<30) conditions — and, more importantly, divergences.

The daily process where your broker settles overnight interest on open positions — happens at 5pm New York time.

A bearish reversal pattern where price grinds higher in a narrowing upward channel — usually breaks down.

A unit that measures profit or loss in multiples of the initial risk taken on a trade — normalizes performance across different position sizes.

The amount of money or percentage of account equity you put at risk on a single trade — usually 1-2% for serious traders.

The mathematical probability that your account will be wiped out before your strategy's edge has time to play out — the closer to zero, the better.

A monthly measure of consumer spending at retail stores — a real-time read on consumer health and economic momentum.

The central bank for Australia — sets the cash rate that drives AUD currency pairs.

The central bank for New Zealand — sets the official cash rate that drives NZD currency pairs.

Market sentiment when investors are optimistic and willing to take risk — typically bullish for equities, commodities, and high-yield currencies.

Market sentiment when investors are scared and seeking safety — typically bullish for safe havens and bearish for risk assets.

The tendency to give more weight to recent events than older ones — drives overreactions to fresh news and short-term noise.

The difference between the buy (ask) and sell (bid) price — your cost of entering a trade.

Selling something expecting its price to go down — the bearish opposite of going long.

A price level where buyers have historically stepped in to stop the decline and turn price back up.

An order that automatically closes your trade at a predetermined loss level — your first line of survival.

The interest you pay or earn for holding a forex position open overnight — based on the rate difference between the two currencies in the pair.

The difference between the price you expected to get on an order and the price you actually got — usually worse.

A neutral continuation pattern with a falling top and a rising bottom — both sides squeeze toward the apex before a breakout.

A bearish candlestick with a small body at the bottom and a long upper wick — a rejection of higher prices at the top of an uptrend.

A momentum indicator that compares the current close to its recent high-low range — used to spot overbought and oversold conditions.

A trend-following indicator based on ATR that plots a single line above or below price — line below means uptrend, above means downtrend.

An order that becomes a market order once price reaches a specified trigger level — used to enter on a breakout.

A combination order that triggers like a stop but fills like a limit — protects against bad fills during fast markets.

A pending order to sell BELOW the current price — used to enter short when a breakdown below support occurs.

A pending order to sell ABOVE the current price — used to enter short on a rally to a resistance or value level.

A risk-adjusted return metric that measures how much excess return you're getting per unit of risk — higher is better.

A risk-adjusted return metric similar to Sharpe but only counts downside volatility — better for asymmetric strategies.

The automatic closing of your positions by the broker when your margin level drops too low — happens without warning.

The central bank for Switzerland — known for unpredictable interventions to weaken the safe-haven Swiss franc.

An asset that investors buy when they're scared — historically the US dollar, Japanese yen, Swiss franc, gold, and US Treasuries.

Continuing a losing course of action because of resources already invested — driving traders to add to losers and refuse to cut losses.

The tendency to credit wins to your skill and losses to bad luck — prevents real learning from mistakes.

A broker that routes orders straight through to liquidity providers without dealer intervention — similar to ECN but less transparent.

A UK-specific way to speculate on price movements of financial markets — treated as gambling, so profits are tax-free in the UK.

An order that automatically closes your winning trade at a predetermined profit level — your exit plan in advance.

The emotional state where you're trading from anger, fear, or frustration instead of your plan — the precursor to blowing up your account.

The smallest possible price change for a given instrument — one tick is the minimum increment a price can move.

One of the four main daily time windows when a major forex center is open — Sydney, Tokyo, London, or New York.

A three-peak reversal pattern where price tests the same resistance level three times and fails — a stronger version of the double top.

A three-trough reversal pattern where price tests the same support level three times and holds — a stronger version of the double bottom.

A stop loss that automatically moves in your favor as price moves — locks in profit while letting winners run.

A written record of every trade you take — including reasoning, emotions, execution quality, and lessons learned.

The amount of your account equity locked up as collateral for open positions — can't be used for new trades until positions close.

The percentage of the labor force that is jobless and actively seeking work — a key measure of economic health.

An intraday indicator that shows the average price an asset has traded at, weighted by volume — used as a benchmark and dynamic support/resistance.

A momentum oscillator similar to stochastics that measures overbought and oversold conditions on an inverted scale (-100 to 0).

The percentage of your trades that close profitably — one half of the equation that determines profitability.

A graph showing interest rates on government bonds across different maturities — its shape is a powerful economic indicator.

When short-term bond yields exceed long-term yields — historically the most reliable recession indicator known.