Trading Glossary

Complete glossary of candlestick patterns, trading traps, and market concepts

This glossary explains the trading terminology used throughout Candle Whisperer. Each term includes a clear definition, practical examples, and common misconceptions traders should avoid.

Terms are organized by category: trap patterns that catch traders off-guard, core concepts for analysis, market regimes, location-based filters, volume analysis, and candlestick patterns. Click any term for an in-depth explanation with chart examples.

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Trading Traps

Common trading traps and how to avoid them

Bull Trap

A false breakout upward that quickly reverses

Bear Trap

A false breakdown downward that quickly reverses

Fakeout

A false move beyond a key level that quickly reverses

Counter-Trend

Trading against the prevailing market direction

Premature Entry

Entering a trade before proper confirmation

Doji in Chop

A doji pattern appearing in a ranging, choppy market

Pattern in Chop

Any candlestick pattern appearing in a choppy, ranging market

Overextended

A market that has moved too far too fast

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Core Concepts

Core trading concepts and methodologies

NO_TRADE

The decision to not enter a trade due to unfavorable conditions

Trend Alignment

Trading in the same direction as the prevailing trend

Breakout

Price moving decisively beyond a key level

Trend

General direction in which the price of an asset is moving

Expectation Order Flow

The directional framework: if highs fail and demand holds, the market is bullish — and vice versa

Risk of Ruin

The statistical probability of losing a predetermined percentage of your account before reaching your profit target

POI Selection

The process of choosing the highest-probability supply and demand zones to trade from

Trading Framework

A structured set of operating principles that creates consistency in how you approach the markets

Trading Plan Template

A structured one-page document that pre-defines rules for all four pillars before the trading session begins

Liquidity

Clusters of stop losses waiting to be triggered at key levels

Liquidity to the Left

Presence of stop losses before your entry zone, fueling price movement

Break of Structure (BOS)

Price violates the previous swing point in the trend direction

Change of Character (CHoCH)

Signals a potential trend reversal by breaking a key swing point

Order Flow Shift

A confirmed change in control between supply and demand

Buy-Side Liquidity (BSL)

Orders resting above a price level — buy stops, breakout orders, short stop losses

Sell-Side Liquidity (SSL)

Orders resting below a price level — sell stops, breakdown orders, long stop losses

Break vs Sweep

The framework for determining if a level break is genuine continuation or a liquidity grab reversal

Fixed Percent Risk

Risking a constant percentage of your account on every trade, adjusting lot size to maintain consistency

Four Pillars of Trading

The four components every trading framework must address: direction, POI, entries, and management

Order Flow Realignment

The process of all timeframes re-aligning in the same direction after a pullback — the highest-probability entry window

Front Leg vs Back Leg

The front leg is the most recent 4H directional move (trade this). The back leg is the previous move (use for context only).

Momentum

The strength and speed of a price movement

Liquidity Sweep

When price triggers a cluster of resting orders at a level, creating a surge of volume

Hard Close Candle

A candle that opens and closes beyond a structural level in trend direction

Structural Range

The distance between a swing high and swing low that defines the current trend leg

First Level of Respect (FLR)

The demand or supply zone that holds after the last point of counter-trend pressure fails — your structural floor (or ceiling)

Internal Range Liquidity (IRL)

Supply or demand zones inside a pro-trend move that exist to be consumed — not traded from as counter-trend entries

External Range Liquidity (ERL)

Liquidity outside structural ranges — key swing highs and lows that impulsive phases target

Extreme POI

The supply or demand zone at the base of a structural range — the optimal price to trade from

Liquidity POI

A supply or demand zone that sweeps structural liquidity as it forms, adding absorbed orders

Multi-Timeframe Workflow

The top-down confirmation process: 4H bias → 15m/5m confirmation → 1m execution

Position Sizing

Determining the correct lot size for each trade based on account size, risk percentage, and stop loss distance

POI Stacking (Confluence)

When multiple confluence factors align at the same zone — extreme location, liquidity, multi-timeframe alignment, freshness

Intraday Targets

Pro-trend targets = next 4H structural high/low. Counter-trend targets = fixed R:R (e.g., 5R). Always know your target before entry.

Weekly Bias

The directional tendency shown on weekly timeframe

Extreme Entry

Entry at the outer edge of a zone for maximum risk-to-reward

Decisional Entry

Entry at a flip zone for higher probability after liquidity sweep

FLOR (First Level of Respect)

The first sign of respect by price to a supply/demand zone

Last Point of Control (LPX)

The final zone of the old trend that must fail to confirm an order flow shift

Supply/Demand Chain

A series of demand (or supply) zones where each holds and each last point of counter-pressure fails — the strongest order flow confirmation

Zone Flip

When a failed supply zone creates demand, or a failed demand zone creates supply

Drawdown Management

The strategy for surviving and recovering from periods of consecutive losses without destroying the account

Pro Trend vs Counter Trend

Pro trend trades follow the established 4H direction (higher probability). Counter trend trades go against it (need more confirmation).

Trade Management

The fourth pillar: pre-defined rules for stop loss, targets, partials, breakeven, and manual close criteria

Entry Model Selection

Pick one entry model (aggressive or conservative), master it over 100+ trades, then evaluate — stop switching between models

Developing Front Leg

Reading a new front leg as it forms in real time — not in hindsight. Requires patience through pivot signal, structural shift, and confirmation.

LPox (Last Point of Opposite Structure)

Price level where the previous trend changed direction

Impulsive Phase

Strong directional price movement that creates new market structure

Pullback Phase

Corrective movement against the prevailing trend

Complex Pullback

A pullback with internal structure that creates confusion within the structural range

Structural Liquidity

Liquidity below a low that broke a high, or above a high that broke a low

Front Leg Trading

Trading what is being built in the current moment using internal structure and order flow

Trading Psychology

The mental discipline required to execute risk management rules consistently through all market conditions

Continuation vs Reversal Trading

Continuations trade with the established momentum (more frequent, easier). Reversals try to catch the top or bottom (rare, harder).

Fractal Confirmation

The same confirmation pattern — highs/lows breaking, zones holding — repeated on every timeframe from 4H to 1m

Early Enticement

When the market builds liquidity before the real move because none exists nearby

Market Timing

Defining specific trading windows, sessions, and time-based rules within your framework

Catalyst for Pullback (CPB)

A temporary reaction at a zone that causes a pullback within the trend — not a reversal, just a pause before continuation

Flip Zone Entry

Entering at a zone where former supply has become demand (or vice versa) — a fast, aggressive entry model

Trading Simplification

Use fewer concepts per trade. The more zones and tools on your chart, the more paralyzed your execution becomes.

Pro-Trend Mapping Exercise

A backtesting method where you map every single entry opportunity inside one 4H pro-trend leg on the 1m timeframe

Setup Grading (A+ / A / B)

Rating trade setups by quality — A+ setups get full risk, B setups get reduced risk

Risk Scaling by Setup Quality

Allocating more risk to A+ setups and less to B setups — matching position size to conviction level

End of Day Markup

A daily practice where you mark up charts in hindsight — identifying zones, structure, and every available entry

Bar Replay Practice

Replaying price action candle by candle to practice recognizing entries in simulated real time

R Tracking (Available vs Captured)

Tracking how much R was available each session vs how much you actually captured — measures execution quality

Maximum Daily Loss

A fixed percentage ceiling (typically 2%) that stops all trading for the day when reached — prevents revenge trading and catastrophic loss days

Get In and Stay In

A trading mindset that prioritizes participation over perfection — if the thesis holds after a stop hit, re-enter rather than giving up

Risk Entry (Limit Order Entry)

Entering at the POI with a limit order or on first touch — no lower-timeframe confirmation, better price but lower probability

Don't Fiddle in the Middle

A principle that says to avoid trading from mid-range zones where direction is unclear — stick to the extremes of a range for higher probability trades

Top-Down Analysis (Multi-Timeframe Workflow)

Starting from the monthly chart and working down to the 1-minute — each timeframe serves a different purpose in framing your trade

One Pair Mastery

Focusing on a single currency pair to build deep pattern recognition, reduce decision fatigue, and simplify analysis — one pair is more than enough

Trendline Liquidity

Stop orders and buy orders clustered above corrective highs in a downtrend (or below corrective lows in an uptrend) — created by failed structural breaks and forming patterns like descending channels

Complex Correction (Multi-Swing Corrective Phase)

A corrective phase with multiple swings, failed breaks, and changes of character that looks like complex structure on the daily but is one impulse on the weekly

Structural Break Quality (The 4-Point Test)

Evaluating whether a break of structure is genuine (momentum, body closure, follow-through, proportion) or a failed break that creates liquidity

Window of Imbalance (Fair Value Gap)

A price gap between candle wicks where one side overwhelmed the other, leaving an inefficiency that price tends to revisit — used as context, not a direct entry signal

Session Timing (London, New York, Asian)

The three major trading sessions create different types of price action — Asian builds liquidity, London establishes direction, New York continues or reverses

Supply/Demand Break (SD Break)

Instead of tracking every swing point break, track when price breaks through an actual supply or demand zone — proving the breaking side has genuine institutional conviction

Wick Refinement (Entry Precision)

The real institutional interest that powered a move often hides in the wick of the originating candle — refining your entry to the wick gives tighter stops and better R:R

Weak High / Weak Low

A high that fails to take out the corresponding low (or a low that fails to take out the corresponding high) — indicating the level lacks conviction and is likely to be broken

Internal Structure

Everything between two swing points — breaks within this range are complex pullbacks, not trend changes

Premium / Discount Pricing

Above the 50% level of a leg is premium (expensive), below is discount (cheap) — trade supply in premium and demand in discount

Structural Inducement

Liquidity directly in front of a zone that broke structure — the strongest form of inducement because the stops behind it fuel the zone reaction

Following Mitigations

The chain of take-liquidity-mitigate-to-the-left that reveals where institutional orders are concentrated and where price needs to go next

Failed Reaction

A zone produces a bounce but fails to break the previous structural high or low — indicating the zone lacks sufficient orders and will break on the next test

Timeframe Refinement

The process of narrowing a wide higher timeframe zone into a precise lower timeframe entry by finding the exact candle that took liquidity within the larger zone

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Market Regimes

Market regime types and their characteristics

Price Location

Price location and key level concepts

Volume Analysis

Volume analysis concepts

Volume Confirmation

Using volume to validate price movements

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Candlestick Patterns

Candlestick patterns and their variations