Introduction

As someone who’s navigated the ever-changing world of trading for years, I know firsthand how challenging it can be to stay ahead of rapidly evolving trends. From the rise of algorithmic trading to the popularity of Smart Money Concepts (SMC) and Elliott Wave Theory, the landscape keeps shifting—and so do the tools we rely on.

Whether you’re an ICT (Inner Circle Trader) enthusiast, a price action purist, or just someone trying to make sense of liquidity grabs and order blocks, understanding these concepts can give you an edge. In this post, I’ve compiled a comprehensive glossary of key trading terms and methodologies, not just to help you keep up, but to thrive.

Let’s dive in and explore the strategies that smart money uses and the techniques traders like us can leverage to level the playing field.

Core ICT/SMC Concepts

Bullish Order Block

A bearish candle or series of candles preceding a strong upward price movement. Represents an area where institutional traders entered buy positions. Price often retraces to this level for potential trade entries.

Bearish Order Block

The opposite of a bullish order block. A bullish candle or series of candles preceding a strong downward price movement, signaling institutional sell orders.

Market Structure

The overall trend of the market identified through patterns like higher highs (bullish) or lower lows (bearish). Key shifts include Break of Structure (BOS) and Change of Character (CHoCH).

Liquidity

Areas in the market where significant pending orders (e.g., stop-losses or buy/sell orders) are located. Institutional traders often target these areas to execute large trades.

Fair Value Gap (FVG)

A gap left by institutional price movement, representing an inefficiency in the market. Price often revisits this area before continuing in its intended direction.

Break of Structure (BOS)

A price action pattern where a significant support or resistance level is broken, indicating a continuation of the trend.

Change of Character (CHoCH)

A shift in market direction identified by the first break of an opposite trend structure, signaling a potential reversal.

Kill Zone

Specific times of the day when institutional activity and market volatility are highest. Examples include the London Kill Zone and New York Kill Zone.

Liquidity Grab

A deliberate price movement by institutions to trigger retail stop-losses or entries before reversing in the intended direction.

Institutional Candlestick

A large candlestick (or sequence) associated with high institutional activity, often forming order blocks or signaling breakouts.

Smart Money

Refers to institutional traders, banks, and hedge funds whose trading activity drives market movements. Retail traders aim to align with their strategies.

Iceberg Orders

Hidden orders used by institutions to mask their intentions. Only a portion of the total order is visible in the order book at any time.

Time and Price Theory

A principle in ICT trading that price action is influenced by time, such as the opening and closing of trading sessions.

Session Bias

The tendency for certain price movements or trends to occur during specific trading sessions (e.g., Asian, London, New York).

Order Flow

The real-time movement of buy and sell orders in the market, often observed in Level 2 order books.

Complementary Trading Styles

Elliott Wave Theory

A technical analysis framework based on the idea that markets move in predictable waves:

  • Impulse Waves (1, 3, 5): Trend continuation.
  • Corrective Waves (A, B, C): Counter-trend moves.

Elliott Wave traders often use Fibonacci levels to forecast wave extensions and retracements.

Wyckoff Method

Focuses on the accumulation and distribution phases of institutional trading:

  • Accumulation: Institutions build long positions before a price rise.
  • Distribution: Institutions sell off positions before a price decline.

Key tools include the Wyckoff Schematic and Spring tests.

Harmonic Patterns

Patterns based on Fibonacci ratios:

  • Examples: Gartley, Butterfly, Bat, and Crab patterns.
  • Harmonic traders look for precise retracement and extension levels for entries and exits.

Volume Profile Trading

Analyzes the distribution of traded volume across different price levels to identify areas of high activity (value areas) and low activity (gaps).

Price Action Trading

Trading based purely on chart patterns, candlestick formations, and key levels, without the use of indicators.

Fibonacci Retracements and Extensions

Tools used to predict potential reversal or continuation levels based on Fibonacci ratios (e.g., 0.618, 1.618).

Mean Reversion Trading

A strategy that assumes price will revert to its mean or average level over time. Often used in range-bound markets.

Momentum Trading

Focuses on trading in the direction of strong price moves. Momentum traders use indicators like RSI or MACD to confirm trends.

Advanced Concepts

Order Book (Level 2 Data)

A detailed view of buy and sell orders at various price levels, used by scalpers or high-frequency traders to identify short-term opportunities.

Swing Trading

A medium-term trading style where traders hold positions for several days or weeks, capitalizing on market “swings” between support and resistance.

Scalping

A short-term strategy focused on making small profits from quick trades, often within minutes or seconds.

Quantitative Trading

Uses algorithms and mathematical models to identify trading opportunities, often involving statistical arbitrage or machine learning.

Arbitrage

Exploiting price differences between markets or instruments. Examples include cross-exchange or triangular arbitrage in forex and crypto.

Conclusion

Trading is a journey of constant learning and adaptation. By understanding the foundational principles of ICT/SMC and exploring complementary strategies like Elliott Wave Theory or Wyckoff, traders can develop a holistic approach to market analysis. Whether you’re a scalper, swing trader, or algorithmic enthusiast, these concepts offer tools to align with the market’s “smart money” and improve your trading edge.

Ready to refine your strategies? Dive deeper into these concepts and take your trading to the next level.

What concepts would you like to explore next? Let us know in the comments or reach out on ProfitView!