📚 Reference — Glossary & Disclaimer

A–Z Glossary

Ask — The price at which the broker sells to you (your buy price). Always higher than the bid.

ATR (Average True Range) — An indicator measuring average price volatility per candle, used to size stops and positions.

Backtest — Simulation of a trading strategy on historical market data to evaluate past performance.

Bid — The price at which the broker buys from you (your sell price). Always lower than the ask.

Breakout — A price move that exits an established support or resistance level with conviction.

Broker — An intermediary company that provides access to the market for individual traders.

Calmar Ratio — Annualized return divided by maximum drawdown. Measures return per unit of worst-case loss.

Carry Trade — A strategy that buys a high-interest-rate currency funded by borrowing a low-interest-rate currency, earning the interest differential.

CFD (Contract for Difference) — A derivative instrument that allows speculation on the price change of an asset without owning it.

CLOB (Central Limit Order Book) — A real-time, sorted list of all open buy and sell orders, matched automatically when prices cross. The execution mechanism used by HyperFX.

CPI (Consumer Price Index) — The primary inflation indicator for most economies.

Drawdown — The decline of account capital from its most recent peak to the lowest subsequent point.

ECN (Electronic Communication Network) — A broker model that routes orders directly to the interbank market without internal dealing intervention.

Equity — Total account value including all unrealized gains and losses on open positions.

Expert Advisor (EA) — An automated trading robot coded in MQL5 for MetaTrader 5.

Fair Value Gap (FVG) — A price gap between three consecutive candles that price tends to revisit. A Smart Money Concepts term.

Forex / FX — Foreign Exchange; the global over-the-counter market for currency trading.

Forward Test — Running a validated strategy on live market data in real time, without real capital, to verify live-market behavior.

Fundamental Analysis — The study of macroeconomic variables (interest rates, GDP, inflation, etc.) to forecast currency movements.

GDP (Gross Domestic Product) — Broadest measure of economic output; a key driver of currency value.

Hedge — A trade or position taken to reduce or offset risk from an existing exposure.

Higher High / Higher Low (HH/HL) — The structural definition of an uptrend: each successive peak is higher than the last, and each trough is higher than the last.

Leverage — The ratio between the size of a position and the capital deposited to hold it. E.g., 1:100 leverage means $1,000 controls $100,000 notional.

Liquidity — The market's capacity to absorb orders without significant price impact.

Long — A position that profits when the price rises (buying the base currency).

Lot — The standard unit of position size in Forex. 1 standard lot = 100,000 units of the base currency. 1 mini lot = 10,000. 1 micro lot = 1,000.

Lower High / Lower Low (LH/LL) — The structural definition of a downtrend.

Margin — Capital required to open and maintain a leveraged position. Locked as collateral while the position is open.

Maximum Drawdown (MDD) — The largest peak-to-trough decline in account equity over a measured period.

Mean Reversion — A strategy based on the expectation that price extremes will return to a historical average.

MetaTrader 5 (MT5) — The most widely used trading platform for retail Forex and CFD trading.

MQL5 — The programming language used to build Expert Advisors and indicators on MetaTrader 5.

NFP (Non-Farm Payrolls) — The US monthly employment report, released the first Friday of each month. One of the highest-impact data releases in Forex.

Order Block — In Smart Money Concepts: the last opposing candle before a strong directional impulse move — often acts as future support or resistance.

OTC (Over-The-Counter) — Market structure where transactions occur directly between parties, not through a centralized exchange.

Pip — The smallest standard price increment for a currency pair. For most pairs, the 4th decimal place (0.0001). For JPY pairs, the 2nd decimal place (0.01).

Pipette — One-tenth of a pip (5th decimal for most pairs).

PMI (Purchasing Managers' Index) — A leading indicator of economic activity in manufacturing and services.

Position Sizing — The calculation of the appropriate trade size based on account capital, risk percentage, and stop distance.

Profit Factor — The ratio of total winning trades to total losing trades. Must be > 1.0 for a net-profitable strategy.

Quantitative Trading — Strategy development based on mathematical and statistical models, tested rigorously before deployment.

Quote Currency — The second currency in a pair, used to price the base currency.

R:R (Risk/Reward Ratio) — The ratio between the maximum loss on a trade (stop distance) and the expected gain (target distance).

Rollover / Swap — The interest charge or credit applied when a leveraged Forex position is held past the daily rollover time (typically 5pm New York).

RSI (Relative Strength Index) — A momentum oscillator that measures overbought/oversold conditions on a 0–100 scale.

Scalping — A trading style targeting 1–5 pip moves, held for seconds to minutes, repeated many times per session.

Sharpe Ratio — Return above the risk-free rate divided by standard deviation of returns. The primary risk-adjusted performance metric.

Short — A position that profits when the price falls (selling the base currency).

Slippage — The difference between the expected execution price and the actual fill price.

Smart Money Concepts (SMC) — A framework for analyzing institutional order flow using concepts like order blocks, fair value gaps, and liquidity pools.

Sortino Ratio — Like Sharpe, but only penalizes downside volatility. A more accurate measure for asymmetric return profiles.

Spread — The difference between the bid and ask prices. The primary transaction cost in Forex.

Stop Loss — A pre-defined price level at which a position closes automatically to limit losses.

Support / Resistance — Price levels where historical buying (support) or selling (resistance) has concentrated, and may recur.

Swing Trading — A trading style holding positions for days to weeks, targeting intermediate-sized price moves.

Take Profit — A pre-defined price level at which a position closes automatically to lock in gains.

Technical Analysis — The study of historical price and volume data to identify patterns and forecast future movements.

Tick — The smallest actual price movement recorded.

Trailing Stop — A dynamic stop loss that moves in the direction of a profitable trade, protecting gains without capping potential.

Trend Following — A strategy that identifies established trends and trades in their direction until reversal signals appear.

Ulcer Index — A metric measuring the depth and duration of drawdowns combined — captures the "pain" of prolonged losses.

VWAP (Volume-Weighted Average Price) — The average price weighted by trading volume at each level; used as an institutional benchmark.

Walk-Forward Analysis — A strategy validation technique using rolling optimization and out-of-sample testing windows to prevent overfitting.

Win Rate — The percentage of trades that close at a profit. Must be interpreted alongside the risk/reward ratio, not in isolation.

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⚠️ Risk Disclaimer

:::danger Important — read before trading Trading Forex and any financial market involves substantial risk and is not suitable for all investors. You may lose part or all of the capital you invest. Leverage can amplify both gains and losses. Past performance — whether of any strategy, system, or published track record — does not guarantee future results.

This documentation is purely educational and informational. It does not constitute investment advice, an offer to sell, or a solicitation to buy any financial product or instrument. Before trading, seek guidance from a qualified and regulated professional, read your broker's documentation carefully, and never invest capital whose loss would compromise your financial stability.

HyperFX is a decentralized protocol. It is not a regulated financial advisor, broker, or investment manager. The dApp performs IP-based geo-fencing in compliance with applicable law. Users are responsible for compliance with the laws of their own jurisdiction.

HyperFX accepts no responsibility for investment decisions made by third parties based on the content of this documentation or any published trading operation. :::