Forex and SMC glossary
Forex and SMC glossary. Original Forex education and synthetic practice from Candle Reason.
These definitions support this course. ICT/SMC terminology is not universally standardised.
ICT and SMC
ICT refers to The Inner Circle Trader, the educational identity of Michael Huddleston. SMC means Smart Money Concepts, a wider community label for structure and liquidity approaches.
Bullish and bearish
Directional descriptions: bullish refers to a rising-price interpretation, bearish to a falling-price interpretation.
Entry price
The price where a position is opened or where a hypothetical observation assumes opening.
Quote basis
Which price series forms the candles: bid, ask or the midpoint between them.
Forex
The exchange of one currency for another. A Forex quote tells you how much of one currency buys one unit of another.
Currency pair
Two currencies quoted together: the first is the base, and the second is the quote currency.
Base currency
The first currency in a pair. Position size in base units describes how many units of that currency the position represents.
Quote currency
The second currency in a pair. The displayed rate is expressed in this currency per one unit of the base.
Bid
The quoted price at which you can sell the base currency, subject to available execution.
Ask
The quoted price at which you can buy the base currency, subject to available execution.
Spread
The difference between ask and bid. It is one part of trading cost.
Pip
A standard unit for measuring a currency-pair move: 0.0001 for our non-yen pairs and 0.01 for USD/JPY.
Pipette
One tenth of a pip. It adds one decimal place to a standard pip quote.
Lot
A way of expressing position quantity. In our calculator, one standard Forex lot is 100,000 base-currency units.
Candlestick
A compact picture of price during one time interval. The body joins open and close; the wicks extend to the high and low.
OHLC
Four prices describing an interval: its first price, highest price, lowest price and last price.
Timeframe
The duration represented by one candle. M5 is five minutes, M15 fifteen minutes and H1 one hour.
Long and short
Long means buying the base currency against the quote; short means selling it against the quote.
Stop loss
An order or rule intended to close a position when an adverse price level is reached.
Take profit
A planned favourable exit level or order. It is a target, not a guaranteed outcome.
Leverage
The ratio between position exposure and the margin required under the applicable rules.
Margin
Collateral required to support a position. Free margin is the remaining amount available under the account and broker rules.
Exposure
The total position quantity or value whose price changes affect the account.
Trading session
A time window used to organise the trading day. Forex has no single worldwide exchange opening bell.
UTC
A common time reference that lets observations be compared across locations.
Daylight saving time
A seasonal change to the local clock in participating regions. London and New York do not always change on the same dates.
Swing high and low
A local turning point under a specified confirmation rule.
HH, HL, LH and LL
Labels comparing one confirmed swing with the previous swing of the same kind.
Liquidity
In general, the ability to transact. In our chart studies, liquidity references are levels where orders might cluster.
Buy-side liquidity
A label for possible buy orders above a price reference, including stops used to exit short positions.
Sell-side liquidity
A label for possible sell orders below a price reference, including stops used to exit long positions.
Liquidity sweep
An excursion beyond a reference followed by a return inside it. Our beginner exercise uses the same candle close.
Fair Value Gap
Look at three candles in order. When the first and third candle price ranges do not overlap, the price band between them is called a Fair Value Gap in ICT/SMC vocabulary. Our rule uses the full wick ranges and requires a positive-width band.
Bullish FVG
The upward version of our three-candle gap rule: first high < third low.
Bearish FVG
The downward version of our three-candle gap rule: third high < first low.
Risk budget
A planned loss amount calculated from a hypothetical balance and chosen percentage.
Position size
The quantity whose stop-distance loss, currency conversion and costs fit the planned cash budget under the declared assumptions.
Account-currency conversion
Convert a quote-currency result into the currency of the account using the declared exchange rate.
R multiple
A result expressed relative to the original planned cash risk for that observation.
Reward/risk ratio
Planned favourable distance divided by planned adverse distance, with the direction and prices stated.
Win rate
Winning observations divided by the scored sample count under your stated result categories.
Average winner and loser
The mean positive and mean negative result in a sample, expressed in consistent units.
Expectancy
The average outcome expected under declared probabilities and payoff assumptions; in a sample, it is estimated from recorded results.
Drawdown
A decline from a previous peak in the measured equity or cumulative-result series.
Losing streak
A consecutive run of recorded losing outcomes under a fixed scoring convention.
Slippage
The difference between the expected order price and the actual execution price.
Trading costs
Charges or execution effects that reduce the net result, including spread, commission and applicable financing.