Trading Strategy Terms

Accumulation is the market phase where institutions quietly build long positions after a downtrend, leading to a range before a bullish breakout.

Algorithmic trading uses automated rules or code to execute trades at high speed, enforcing discipline and allowing strategies to run around the clock.

Arbitrage exploits price discrepancies between markets or instruments to capture low-risk profit, often via rapid execution.

A carry trade is a strategy where you borrow a low-interest-rate currency (like JPY) to buy a high-interest-rate currency (like AUD). You profit from the interest rate differential through daily rollover payments, but face risk if the exchange rate moves against you.

Contrarian trading involves taking positions opposite the crowd when sentiment or positioning reaches extreme levels.

Day trading involves opening and closing all positions within the same trading day to avoid overnight risk. Day traders use small timeframes (1-15 min) and make multiple trades daily.

Discretionary trading relies on the trader's judgment rather than rigid rules, offering flexibility but demanding strict discipline.

Distribution is the phase where large players sell into strength after an uptrend, often preceding a downtrend.

Grid trading places staged orders above and below price to capture range oscillations, but it requires strict controls to survive breakouts.

HFT uses ultra-fast algorithms to capture microsecond inefficiencies. While retail traders cannot compete on speed, HFT shapes spreads and liquidity.

Martingale doubles trade size after each loss in hopes of one win recovering prior losses, but the exponential exposure quickly overwhelms margin and leads to catastrophic drawdowns.

Position trading is a long-term forex approach that holds trades for months or years based on macroeconomic trends and central bank policy. Traders target multi-hundred-pip moves with low trade frequency and wider stops.

Scaling in means building a position in stages as price action confirms the trade thesis, letting traders control initial risk while increasing size when conditions improve.

Scaling out takes profits in stages as price reaches predetermined levels, locking in gains, reducing psychological pressure, and letting a core position ride larger trends.

Scalping is an extremely short-term trading style targeting tiny price movements of 2-10 pips, holding positions for seconds to minutes while executing dozens or hundreds of trades daily.

Speculation is entering forex positions purely to profit from anticipated price movement, combining directional analysis with disciplined risk controls rather than hedging business exposure, while expectancy tracking keeps the process professional.

Swing trading captures price swings over days or weeks using 4-hour and daily charts. It balances substantial profit potential with manageable time commitment - ideal for working professionals.

Systematic trading relies on rule-based strategies, often automated, to remove discretion and execute an edge consistently.